November 09, 2010

These polar-opposite imperatives for the structured settlement industry represent S2KM's two strategic lenses for reporting and analyzing simultaneous educational programs this week in Las Vegas sponsored by the National Structured Settlement Trade Association (NSSTA) and the National Association of Settlement Purchasers (NASP).

S2KM's Managing Director, Patrick Hindert, will attend portions of the NSSTA conference (as a NSSTA member and former NSSTA President) and participate in NASP's Friday morning "Industry Analysis" program (as a moderator and speaker). S2KM's continued reporting and commentary about the NSSTA and NASP conferences will appear on this S2KM blog ("Beyond Structured Settlements") as well as S2KM's structured settlement wiki.

NSSTA's strategic mandate is to "protect and preserve".

Question: what exactly does NSSTA want to "protect and preserve"?

The simple answer: Internal Revenue Code sections 104(a) and 130.

More strategically, what NSSTA wants to "protect and preserve" (to the extent possible) are business models and business practices ("good old days") that existed prior to:

One result of NSSTA's "protect and preserve" mandate has been a "dumbing down" of NSSTA's educational programs - at least from a strategic perspective. Some of NSSTA's technical discussions are excellent. For example, NSSTA's legal committee has re-emerged as a leading structured settlement educational resource. And NSSTA's CSSC certification program continues to receive positive reviews despite low attendance and the lack of a continuing education (CLE) requirement.

NSSTA's primary educational problem is the application of its narrow and political strategic framework ("protect and preserve" as opposed to "improve and grow") for its educational programs. For example, NSSTA never invites knowledge leaders from NASP or SSP (or anyone critical of NSSTA political objectives) to participate in NSSTA's educational programs. For another related example, NSSTA educational programs never provide strategic discussions ("Industry Analysis") with alternative perspectives.

Bottom line: NSSTA's educational programs have fallen behind NASP and SSP who now represent the benchmarks for structured settlement educational excellence. For further S2KM reporting about NSSTA's educational demise, see: S2KM's analysis of NSSTA's 2009 educational program. Unfortunately, NSSTA's announced 2010 educational program looks like "the same old, same old" - at least from S2KM's strategic perspective.

By comparison with NSSTA, NASP will devote three hours of its 2010 educational program this week in Las Vegas specifically to "Structured Settlement Industry Analysis". This portion of the NASP program is subtitled: "How to Improve and Grow the Structured Settlement Industry".

Format: S2KM identified and submitted to NASP a preliminary list of strategic
structured settlement questions. NASP encouraged the panelists to identify and address
S2KM questions that most interested them. NASP allocated time for audience questions and participation.

Primary S2KM questions addressed by the NASP panel:

Which 2009 events and developments (legal; financial;
political) will most significantly impact the future of structured
settlements?

What are the best and worst structured settlement business practices?

Are factoring transactions good or bad for structured settlements?

Does public policy support state court ordered structured settlement factoring transactions?

How
has the financial crisis changed the structured settlement market?
Note: although NASP's strategic panel acknowledged the importance of
this issue, the panel also recognized the related comprehensive discussion by the NASP "Capital Markets" panel.

Spencer v. Hartford
- how the recent United States Second Circuit Court decision (denying
Hartford's appeal) impacts the Hartford class action lawsuit and which
other structured settlement programs are now at risk for
potential RICO class action lawsuits?

Revised California protection statute
- viewed by the panel as a legislative victory for the structured settlement industry and featuring
specific "best interest" criteria for state judges to consider in California settlement transfer cases.

Fresno County cases
- viewed by the panel as a judicial victory for the structured settlement industry
with an appellate court ruling that public policy supports state court
approved structured settlement factoring transactions.

Rapid Settlement cases
- viewed by the panel as a victory for the structured settlement industry with
continuing judicial denial of arbitration alternatives to state court
approved transfers pursuant to IRC 5891 and state structured settlement
protection statutes.

Scott Rothstein ponzi scheme - identified as a
legal and public relations reminder that all participants in settlements
featuring periodic payments with potential subsequent payment transfers
would benefit from applicable legislation (protection statutes) and required
state court approvals.

Best and worst business standards and practices - as identified and discussed by the NASP panel:

Is the secondary market good or bad for structured settlements? This question was discussed in detail during the NASP 2008 Annual Meeting
with Jack Meligan and Michael Upchurch providing a primary market
critique of the secondary market. NASP's 2009 Annual Meeting featured
two published critics of secondary market business behavior: Judge
Edward Burke of Arizona and attorney Daniel Hindert of Utah. In
addition, Michael Upchurch participated on the NASP strategic analysis
panel. If the NASP program reached any conclusion for this issue, it
was: the secondary structured settlement market is a reality. Whether
the secondary market is good or bad for structured settlements depends
upon business behavior and business results in both the primary and
secondary markets.

Does public policy support state court ordered structured settlement factoring transactions?
Jeremy Babener discussed the public policy arguments for and against
factoring transactions. Babener concluded that more information is
needed to make a comprehensive public policy declaration. The recent
California appellate court decision in Henderson v. Scioteco
holds that public policy supports state court approved factoring
transactions. Babener, acknowledged the importance of the decision, but
disagreed with the California court's characterization of IRC 5891 as
an "express sanction" of factoring. Richard Risk agreed with
Babener that IRC 5891 does not contain a clear statement of public
policy about factoring. Risk, however, pointed to examples of IRC 5891
legislative history that contradict any claim that public policy is
against structured settlement factoring. As one example, Risk cited the
Joint Committee on Taxation’s report released on March 18, 1999, “Tax Treatment of Structured Settlement Arrangements,” which Risk interprets as public policy support that structured settlements can co-exist with factoring.

S2KM applauds NASP for:

Focusing much of its 2009 educational program on strategic structured settlement industry issues; and also for